The phony war

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The relationship between solar and utilities in the U.S. is often described in terms of conflict. Articles in both the mainstream and trade media frequently use martial terms, describing ‘battles’ over net metering and even a ‘war’ between the solar industry and utilities, as if tanks had been mobilized and missiles fired.
And while there are moments and even entire issues where sharp conflict is the norm, such metaphors do not do justice to the complex and changing interaction between the two industries.
As much as utilities are facing new technical, economic and regulatory challenges with the growth of solar technologies and in particular distributed PV, many have voluntarily deployed substantial solar capacities. And as time goes on, more and more utilities are choosing to take an active role in the solar market instead of fighting inevitable changes.

“Utility-scale”

Tucson Electric Power (TEP) is one of the more ambitious U.S. utilities in terms of deploying solar. In 2014 the Arizona utility installed 73 MW of solar PV, the eighth highest capacity in the nation, and came in 10th place for new watts installed per customer. On a cumulative basis the utility has contracted more solar than mandated under Arizona’s relatively weak renewable portfolio standard.
“It makes sense to integrate as much solar in Southern Arizona as possible,” says TEP Director of Renewable Resources and Programs Carmine Tilghman. He notes that if solar doesn’t makeeconomic sense in sun-drenched southern Arizona, then it doesn’t really make sense anywhere. He also cites the benefits of solar as a hedge against natural gas price volatility.
Tilghman explains that solar meets a number of goals, including emissions reduction, which will be increasingly important when President Obama’s Clean Power Plan starts to take effect. “For today’s short-term transition, the best way to move away from carbon-intensive fossil fuels is to integrate renewables.” TEP is far from the only utility to deploy solar and other renewables in excess of state goals. Xcel Energy estimated that it had around 320 MW AC of solar PV on its system as of June 2014, including everything from rooftop PV systems on homes to large ground-mounted systems. Xcel plans to build 550 MW of large-scale solar in Colorado, Minnesota, Texas and New Mexico over the next few years.
The move to solar is happening even in regions that have traditionally had weak renewable energy policies. Under pressure from state regulators, Georgia Power began a program to procure 210 MW of solar PV in 2012, and now plans to have nearly 900 MW online by the end of 2016. In September, fellow Southern Company subsidiary Alabama Power received state approval to procure up to 500 MW of renewables over the next six years, with solar PV expected to make up most of this. Similar developments have happened in recent years across the nation, leaving only the most backward utilities that are not procuring solar PV either voluntarily or to comply with state-level renewable energy mandates.

Resistance to DG solar

But while these utilities are willing to build and/or sign power contracts with large ground-mounted solar arrays, most are not as interested in supporting distributed PV. TEP and Xcel both cite the lower cost of large utility-scale solar projects, which they say allows them to keep electricity rates low.
“From the standpoint of all of our customers, utility-scale solar (not owned by xAdvertisement

At a glance
  • The language used to describe solar’s relationship with traditional utilities is often confrontational, but evidence suggests a more harmonious reality.
  • Some of the largest utilities in the U.S. have already begun to embrace solar PV, but there has of course been resistance.
  • Arguments over DG solar continue to cause disagreement, with some utilities concerned over a “cost shift” that sees solar customers at an unfair advantage over regular energy consumers.
  • Greater collaboration over technology concerns has been proven to work in isolation, but ownership issues regarding PV components could prove a sticking point.
  • The culture clash between disruptive solar and top-down utilities will continue to experience teething problems, but there is an acceptance that solar will in all likelihood win the day, eventually.

us) is a much better investment and a better way of realizing the economic benefits of solar power,” Xcel Energy Senior Media Representative Mark Stutz told pv magazine .
And while utilities across the country have cited concerns for their customers, statements by utility trade group Edison Electric Institute (EEI) suggest different motivations. In 2013 EEI released a report that says that the rise of distributed solar presents a “disruptive challenge” that “could directly threaten the centralized utility business model.” And if utilities are concerned about distributed solar, they are doubly concerned about rooftop PV’s main policy support, net metering. In 2012 EEI launched a national campaign to weaken solar energy policies, with a special focus on rolling back net metering.
The argument presented by EEI in this campaign is that net metering causes a “cost shift” from its customers who own solar PV and participate in the program to customers who do not own PV. The basis of this claim is that homeowners and businesses with solar PV systems use the transmission and distribution system not only to consume electricity when their arrays are not producing, but to export power during times of overproduction, but only pay for the net electricity they consume. This same argument has been made by utilities including TEP and Xcel.
Distributed energy advocates have countered that rooftop PV offers a host of additional benefits that are typically not considered in utility analyses. These include reduced transmission losses, lower transmission and distribution operations and maintenance costs, and deferred investments in new transmission. Additionally, solar PV tends to produce at times of peak electricity demand, which means that more solar can reduce the use of expensive “peaker” plants and imported power.
Internal documents have revealed that EEI targeted a mix of consumers, state legislators and regulators, and in the three years since there have been many regulatory processes and a good deal of legislation relating to net metering. By the second quarter of 2015, 13 U.S. states were considering changes to the valuation of solar under net metering policies, with a number of these processes driven by utilities.
Regulatory agencies usually require professional studies into the claims being made, and it should not be a surprise that the results vary widely according to who paid for the study.
A 2015 report by the North Carolina Clean Energy Technology Center and Meister Consultants found that when utilities conduct studies of net metering, they typically show this cost shift, whereas most studies paid for by state governments and regulators find that solar generation is providing a net benefit to all ratepayers.
So while there have been a few high-profile cases such as Arizona regula tors allowing Arizona Public Service to impose a fixed charge on its solar customers, other efforts have failed. When regulators do allow charges to be imposed, they are typically only half of what utilities have requested. Meanwhile, net metering caps continue to be raised in a number of states including Nevada and New Jersey, and in 2015 Mississippi became the 45th state to implement the policy.
But while utility claims of a cost shift may fall flat, there is a real mismatch between existing utility rate structures, policies like net metering, and the value that solar provides. Part of the problem is that electricity rates are typically designed on a 20th century electricity system model. “It was a one-way transaction,” notes Solar Electric Power Association (SEPA) CEO Julia Hamm. “The utility was selling power to the customer, period.” SEPA works as a bridge between utilities and the solar industry, which can be a difficult role during these conflicts. Hamm believes that getting rate design right can allow higher levels of distributed solar to be integrated into the system in a way that works for all parties involved.
“There are win-win possibilities, where utility rates are structured in a way that utilities can recover their fixed costs, and where customers are still receiving what they need to make sure that solar markets can grow,” explains Hamm.

Technical concerns

While the concerns over potential impacts to other ratepayers are often not convincing to state regulators, in a few parts of the U.S. with high penetrations of solar and wind, utilities may have legitimate technical concerns. Retail utilities are responsible for delivering reliable power, and integration of variable renewable energy like wind and solar requires changes to operations and the grid itself.
These challenges have often been overstated, and many states still have laws on the books limiting distributed generation to an absurdly low level. And while some grids may have conditions that limit power generation from solar PV, often this is the result of a failure to update regulations to reflect the progress that has been made in integrating higher levels of wind and solar in the last few decades.
Regardless, legitimate technical concerns do exist in states like Arizona, where in-state solar meets more than 5% of electricity demand.
One problem cited by Carmine Tilghman of TEP is that his utility has limited visibility into the operation of rooftop PV. “You somehow fly a little blind with that, because they may all be 5 kW (systems), but cumulatively, in aggregate, that’s a very large generator that we can’t see,” explains Tilghman.
The problem here may have less to do with technology than policy and operating procedures. Companies like microinverter maker Enphase Energy collect detailed information from vast fleets of PV systems where their technology is deployed. However, this information does not necessarily make it to the utilities.
Enphase is working on solving this problem. Through a partnership with Hawaiian Electric Companies (HECO), Enphase provides detailed information not only on the operation of PV systems using its technology, but on what is happening on HECO’s grid. As a result of this, HECO allowed an additional 4,000 customer PV systems to come online on the island of Oahu alone.
The Enphase/HECO collaboration points to how distributed solar PV can be an asset to utilities and grid operators. In New York, Long Island Power Authority used a special bonus to its feed-in tariff system in 2013 to incentivize PV systems in load constrained areas, which allowed it to avoid additional investments in transmission and generation.
In addition to these services, many inverters have the ability to provide voltage stabilization and reactive power, and PV systems can provide resilience in the event of blackouts. However, many of these services are only available if utilities are able to control inverters, which are on the customer side of the meter for distributed PV.
Allowing control of PV systems and wind plants has worked in Germany and Spain, which includes curtailing output under certain conditions. In the U.S., the rules are different. “You run into much bigger issues, such as ownership, energy curtailment and compensation,” notes Tilghman.
To maximize benefits, it may also be necessary for utilities to look at demand-side resources more holistically. This is already happening in California, where the state’s Public Utilities Commission (PUC) released a proposed decision in August to require that utilities consider energy efficiency, distributed PV, energy storage and other resources on the customer side of the meter in an integrated manner.
While this is exciting for the solar industry and distributed PV system owners, what is less exciting is that we may eventually need to change regulations to allow utilities and grid operators more control over inverters, PV systems and energy storage systems, all of which are private property.

If you can’t beat ‘em…

A new development to this ongoing dialogue is the choice by some utilities to deploy and/or own distributed generation. This includes utilities that have tried to impose charges on PV system owners citing an alleged cost shift.
In Arizona, both APS and TEP have asked state regulators for permission to own increasingly larger portfolios of distributed solar. Meanwhile, Georgia Power has formed a residential solar company as a distinct business entity from its regulated utility business, and NRG bought a series of solar companies to assemble its Home Solar division.
While this may result in more distributed solar being put online, some observers have expressed concerns that this will serve to undermine the degree of economic democracy that owning distributed solar provides. John Farrell, Director of Energy Democracy at the Institute for Local Self Reliance (ILSR), argues that utility ownership of solar represents a transfer of the economic benefits of distributed generation from customers to utilities.
“The net effect is going to be less economic benefit distributed among electric customers than should be possible without utility participation,” asserts Farrell.
Farrell joins many in the solar industry who are concerned that utilities may be trying to crush their competition. “I see it more as: How do we take away market share from what we see as a threat to our bottom line,” explains Farrell. “With the exception of NRG, They are all companies that have a history of fighting back against distributed solar that is not utility-owned.”

Coping with disruption

The conflicts over distributed solar and net metering bring up the issue of what role utilities should have. And while someone will need to manage the transmission and distribution (T&D) of electricity and maintain the grid, the regulated monopoly model that has held on across many parts of the U.S. is a relic of the early 20th century. It may be too outdated to deal with this level of technological change, and ultimately is not fully compatible with American ideas about markets, choice and competition.
Some envision a more limited role for utilities. John Farrell of ILSR proposes that utilities could become generation-agnostic entities that operate and maintain the T&D system, which he calls making the grid public. “Can we turn the distribution system into a common carrier like roads?” asks ILSR’s Farrell.
At the end of the day, solar is a disruptive technology. As described by Tony Seba in his book Clean Disruption, solar is not unlike previous disruptive technologies such as cell phones and digital cameras, which swept away existing industries.
Given that incumbent industries typically have a hard time adapting to disruption, utility hostility to distributed solar should not be surprising. “When you put yourself in the shoes of a solar company or in the shoes of a utility, both are fighting to keep their business alive,” notes Julia Hamm of SEPA.
It is clear who is going to win this fight in the long run. Utilities have two choices: adapt or die. In the interim, utilities can be less of an obstacle if the solar industry finds ways to help them adapt and find a new role, which may include changing regulations and even legal and regulatory structures. The more we work together, the better it will be for everyone.

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